How significant is the WTO trade deal agreed in Bali on 7 December? The headline in the Financial Times referred to it as a ‘landmark global trade deal', and many reports said it was an ‘historic trade deal’. The Guardian's headline, on the other hand, was ‘ Bali trade agreement: WTO set the bar high but has achieved little’, and Larry Elliott, the economics editor, said the deal was a triumph ‘but only in the way that Dunkirk was a triumph for Britain in 1940.’
The Bali deal was historic. It is the first multilateral trade agreement achieved by the WTO since it was created in 1995. And it comes after 12 years of protracted negotiations over the Doha Development Round. The apparently never-ending talks were compared with the classic Monty Python sketch in which a customer in a pet shop holds up a dead parrot but the shopkeeper insists the parrot is only resting. Many thought Doha was dead.
The fact that WTO trade ministers finally concluded an agreement showed that Doha was not completely dead. But the Bali deal was ‘Doha lite’. It involved elements of the Doha Round where it was thought a deal could be readily achieved. The main components were trade facilitation (reducing the cost of moving goods through customs borders), an agriculture package that allowed governments to run food security programs without being criticised for breaching WTO commitments, and reaffirmation of the commitment to duty- and quota-free access to markets for less developed countries.
The main achievement was the trade facilitation agreement, which has been estimated to add over US$1 trillion to the global economy. As US trade representative Michael Froman said, ‘that, my friends, is no small package.’ But it will take many years for those benefits to materialise.
Perhaps the agreement in Bali also saved the credibility of the WTO so it can fight another day. But will the Bali deal alone breathe life into multilateral trade liberalisation and raise the prospect that the more ambitious aspects of Doha can be completed?
WTO Director General Roberto Azevedo is optimistic, saying that ‘the decisions we had taken today are an important stepping stone toward the completion of the Doha Round’. Even Michael Froman was enthused, saying ’we know we can make the journey because we have succeeded today. We know the lights are burning bright at the WTO. Now let’s do it again.’
But the Bali experience showed how difficult it is to reach agreement in a multilateral setting, even on less contentious issues. And it took two years to complete.
Bali demonstrated the problems of negotiating a package of measures where difficulties in one area can block agreement in others. For example, the trade facilitation agreement was the most beneficial aspect of the deal and was described as a win-win outcome or a ‘no brainer’. Yet the whole Bali deal, and in turn the future of the WTO, nearly came unstuck at the last minute over Indian refusal to accept the agricultural aspects and Cuba objecting to the removal of a reference to the US trade embargo on Cuba.
WTO decisions are made on a consensus basis and one member can scuttle the whole deal. Rather than saving multilateralism, the Bali experience may have increased momentum for countries to pursue regional agreements. China has been a traditional supporter of a multilateral approach to trade centered on the WTO, but in Bali Chinese Commerce Minister Gao Hudeng said ‘We are also open minded toward other multilateral – and plurilateral – negotiations’.
The ministers in Bali called on WTO negotiators to use the next 12 months to draft a plan of work for the future. But unless there are changes in approach, it is difficult to see that the more ambitious elements of Doha will be concluded. Bali demonstrated that the path ahead must involve ‘bite sized’ components of a trade deal, though even here, significant political pressure is required to get an outcome.
The multilateral approach to trade liberalisation is important. It is the only approach which benefits all countries, particularly developing countries. And the maintenance of the credibility of the WTO is essential. But the WTO needs to move on from the Doha Round, notwithstanding the ‘success’ of the Bali deal.
It is welcome that Australia has signaled trade as being a priority for its presidency of the G20. If the forum is to be the premier body for international economic cooperation, it should aim to provide strategic direction for the multilateral trading system and the WTO in 2014. And this has to go beyond pro forma statements of support buried in leaders’ communiques. In 2014, G20 leaders need to directly discuss where the global trading system is heading.
Photo by Flickr user realMaxQ.